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Aug 1, 2014
Article #254
Author: Mel Jones

Many buyers of restaurants are in the dark about what the closing costs are when using an SBA loan to purchase a restaurant business.

I recently closed an SBA loan transaction so I thought I'd itemize those costs to help one understand what their out-of-pocket costs will be. 

The sales price for this restaurant was $525,000. So you may adjust these prices accordingly. These costs are for California, which tend to have the highest costs due to over-regulations and plenty of city and county agencies sticking their fingers in the pie by gouging the buyers. 

Escrow Fee                                     $3,500 (Loan Docs, Tie-ins, UCC Filings)

Liquor License Transfer Fee           $1,250+ 

Health Permit/Inspection Fee          $1,300+

Entertainment Permit Fee (C.U.P.) $1,000+ 

Dance Permit, If any                       $  600+

Equipment and Facility Inspection  $  400

A/C and Cooler Inspections            $  150

Fictitious Name Statement Filing    $   25

SBA Loan Fees                                 $15,000+(1)

Rent Deposit                                     at least one month (2)

First Months Rent                              (3)

Utility Deposits                                   (4)

Worker Comp Deposit                       (5)

Life Insurance Policy                         (6)

Most of these costs are negotiable between the Seller and Buyer, except the rent.  Our Arizona clients must know that the fees are much lower in that state, perhaps a quarter of California's fees. 

(1) SBA Loan fees tends to run in the $13,000 to $17,000 range and includes appraisal fees, loan fees, SBA Guarantee Fee and several other fees. 

(2) Most leases require a one-month rent deposit.  But if your credit is weak the landlord may require more rent deposit.

(3) First month's rent is will contain the base rent plus NNN/CAM charges. 

(4) The amount of deposit varies with each utility, but could be well over $1,000 for each utility company. 

(5) Each business will have deferent Workers comp rates. But again, it will likely be thousands. 

(6) Often the bank will require the 

As one can see, the costs are staggering, but leverage is an excellent way for an experienced restaurant operator, with good credit, to leverage into a profitable business instead of trying to recreate the wheel and all the personal energy that goes into accomplishing that. 

And it is time to leverage!  Make no kistake about it.  Interest rates have never been lower. Business values are just starting to go up. So get in while the bargains aare around!


Mel Jones is one of the premier restaurant brokers in the nation having published hundreds of articles on buying and selling a restaurant and bar business, selling thousands of restaurants in CA., WA and AZ and building one of the most copied business models in the brokerage industry.  Mel started SellingRestaurants in 2004 with the one simple concept, give the buyers the information they need to make intelligent buying decisions without being pestered by a broker or hiding information, prepare the business for market by researching key details that make or break deals and educate the buyer on the buying process to create an intelligent buyer.  Prior to SellingRestaurants, Mel was a Chief Financial Officer for Universal Music Group, the largest music company in the world.  There he participated in more than $11.5 billion of merger and acquisition transactions.  He also work for top companies such as Nestle Foods, USA. He hold a Bachelors in Business Administration Finance as well as attened Law School at Gonzaga University.  Give Mel a call at 480.274.7000 or e-mail him at [email protected] if you have any questions. 


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